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HP still to turn enterprise round

Posted onFriday, August 23, 2013 - 14:38

CEO Meg Whitman has cited 'challenges' in PCs and the enterprise group for a downbeat view of fiscal 2014 revenue that followed Q3 numbers that did not impress. Among the management changes, Bill Veghte has replaced Dave Donatelli as head of HP's key enterprise business group.

CEO Meg Whitman said: "We see a continued weak enterprise spending environment. Sentiment in the US is improving although not translating to our results yet due to inconsistent execution. I would characterize Europe as challenging and China continues to be soft."

Chief Financial Officer Cathie Lesjak said the company was facing 'extreme competitive pricing in industry server storage and continued weakness in traditional storage demand', while the software business posted a 1% year-over-year growth.

Lesjak said: "We are especially pleased with the continued performance in our strategic areas of cloud, security, and big data.

"At a macro level we expect consumer demand weaknessin the PC industry will likely continue to impact personal systems and we expect continued pricing pressure in printing, personal systems, and Industry Standard Servers."

Whitman added: "We must see networking grow faster. We are the upstart in this business so a flat networking performance is not what we need to see."

HP made a big push into networking a few years ago, challenging Cisco Systems, which, in turn, challenged HP in blade servers. Analysts say Cisco has been gaining in servers, and HP is now conceding that it's struggling in networking.

Dr Sotirios Paroutis, Associate Professor of Strategic Management at Warwick Business School, has researched the company extensively.

Dr Paroutis said: "Where should the focus of Hewlett-Packard's strategic efforts lie? Three areas demand attention. First, the pace of execution needs to accelerate both on the internal and external front. Internally, there needs to be more effort towards quicker resource reallocation from lower performing to higher demand units. Externally, an aggressive set of strategic acquisitions need to materialise in the next few months - similar to Yahoo CEO Melissa Mayer's push for acquisitions. Second, the firm should also put more effort to develop customised solutions for emerging markets, and particularly China. Third, the firm needs to bring to market even more innovative products to meet the increasingly converging consumer and enterprise needs."

"For the past two years, Chief Executive Officer Meg Whitman and her leadership team have been exploring ways to develop a strategy that could help the firm keep in tune with falling global PC sales and increasing tablet and smartphone demand. As HP leaders have admitted, this required some serious soul-searching. But while this soul-searching was taking place, key competitors like Lenovo have been aggressively moving into the mobile space. As a result, Lenovo is now the world's fourth largest smartphone supplier, helping the firm post a 23 per cent increase in profits for Q1 2013, while HP is 'unlikely' to see revenue growth in 2014. It shows just why the company needs to accelerate its pace of execution."